Interim condensed consolidated financial statements. For the three months ended 31 March 2017 (unaudited)

Transcription

1 Interim condensed consolidated financial statements For the three months (unaudited)

2 Interim condensed consolidated financial statements for the three months (unaudited) Contents Report on review of interim financial information... 3 Interim condensed consolidated financial statements Interim consolidated statement of financial position... 5 Interim consolidated statement of comprehensive income... 6 Interim consolidated statement of cash flows... 7 Interim consolidated statement of changes in equity The Group and its operations Basis of preparation Summary of significant accounting policies Segment information Acquisitions and disposals Property, plant and equipment Investments in associates and joint ventures Available-for-sale financial assets Other non-current assets Accounts receivable and prepayments Cash and cash equivalents Other current assets Equity Loans and borrowings Accounts payable and accrued liabilities Other non-current liabilities Revenue Other operating income Operating expenses, net Finance income and expenses Income tax expense Fair value of financial instruments Commitments Contingencies Related party transactions Events after the reporting period

3 Ernst & Young LLC Sadovnicheskaya Nab., 77, bld. 1 Moscow, , Russia Tel: +7 (495) (495) Fax: +7 (495) ООО «Эрнст энд Янг» Россия, , Москва Садовническая наб., 77, стр. 1 Тел.: +7 (495) (495) Факс: +7 (495) ОКПО: Report on review of interim financial information To the shareholders and Board of Directors of PJSC Inter RAO Introduction We have reviewed the accompanying interim condensed consolidated financial statements of PJSC Inter RAO and its subsidiaries, which comprise the interim consolidated statement of financial position as at and the related interim consolidated statements of comprehensive income, changes in equity and cash flows for the three-month period then and selected explanatory notes (interim financial information). Management is responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 Interim Financial Reporting. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. A member firm of Ernst & Young Global Limited 3

4

5

6

7

8

9

10 for the three months (unaudited) 1. The Group and its operations General information on the Group Public Joint Stock Company Inter RAO UES (the Parent Company or the Company or PJSC Inter RAO ) is incorporated and domiciled in the Russian Federation and whose shares are publicly traded. The Russian Federation is the ultimate controlling party of PJSC Inter RAO and has a controlling interest in the Company of over 50%.The main state shareholders of the Parent Company as at are JSC ROSNEFTEGAZ (26.37%) and PJSC FGC UES (14.07%). The Company has controlling interests in a number of subsidiaries operating in different regions of the Russian Federation and abroad (the Company and its subsidiaries collectively are designated as the Group ). The Group is engaged in the following business activities: Electricity production, supply and distribution; Export and import of electricity; Sales of electricity purchased abroad and on the domestic market; Engineering services; Energy effectiveness research and development. The Group s business environment The governments of the countries where the Group entities operate directly affect the Group s operations through regulation with respect to energy generation, purchases and sales. Governmental economic, social and other policies in these countries could have a material effect on the operations of the Group. The Russian Federation, Georgia, Moldavia (including Transdniestria Republic), Turkey, Lithuania, Latvia and Estonia have been experiencing significant (albeit different) political and economic changes that have affected, and may continue to affect, the activities of the Group entities operating in this environment. Consequently, operations in these jurisdictions involve risks that typically do not exist in other mature markets. These risks include matters arising from the policies of the government, economic conditions, the imposition of or changes to taxes and regulations, foreign exchange fluctuations and the enforceability of contract rights. The accompanying interim condensed consolidated financial statements reflect management s assessment of the impact of the business environment on the operating results and the financial position of the Group in the countries where the Group entities operate. Management is unable to predict all developments which could have an impact on the utilities sector and the wider economy in these countries and consequently, what effect, if any, they could have on the financial position of the Group. Therefore, future business environment may differ from management s assessment. 2. Basis of preparation (a) Statement of compliance These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual financial statements as at 31 December (b) Functional and presentation currency The national currencies of the countries where the Group entities operate are usually the individual company s functional currencies, because they generally reflect the economic substance of the underlying transactions and circumstances of those companies. The Group applies judgment in determination of the functional currencies of certain Group entities. The functional currency determination influences foreign exchange gain/losses recognised in profit and loss and translation differences recognised in other comprehensive income. The interim condensed consolidated financial statements are presented in millions of the Russian roubles ( RUR ). The main part of the Group is represented by entities operating in the Russian Federation having RUR as their functional currency. All values are rounded to the nearest million, except when otherwise indicated. 10

11 for the three months (unaudited) 2. Basis of preparation (continued) (c) Seasonality Demand for electricity is to some extent influenced by the season of the year. Revenue is usually higher in the period from October to March than in other months of the year. This seasonality does not impact revenue or cost recognition policies of the Group. (d) Predecessor accounting In the interim condensed consolidated financial statements the Group accounted for acquisition of 100% of shares of LLC ESC Bashkortostan as acquisition amongst entities under common control using the predecessor accounting method (or the pooling-of-interests method). Application of pooling-of-interests method assumes the comparatives are presented as if the entity acquired had always been consolidated. Accordingly, information in respect to the comparative period has been restated and prepared as if the acquisition had occurred from the beginning of the earliest period presented. The effect of the restatement of the Group s interim condensed consolidated financial statements is described below: For the three months 31 March 2016 As previously reported Retrospective consolidation of entity acquired under common control Elimination intercompany adjustment As restated Revenue 224,382 9,349 (1,730) 232,001 Other operating income 1, (5) 1,431 Operating expenses, net (204,506) (9,184) 1,735 (211,955) Operating income 21, ,477 Finance income 1, ,974 Finance expenses (3,192) (79) (3,271) Share of loss of associates and joint ventures 1,624 1,624 Income/(loss) before income tax 21, ,804 Income tax expense (4,704) (26) (4,730) Income/(loss) for the period 16, ,074 Other comprehensive (loss)/income Other comprehensive (loss)/income that will be reclassified subsequently to profit or loss when specific conditions are met Gain on available-for-sale financial assets, net of tax Net loss on hedge instruments, net of tax (20) (20) Exchange loss on translation to presentation currency (1,575) (1,575) Other comprehensive loss, net of tax (1,368) (1,368) Total comprehensive income for the period 15, ,706 Income attributable to: Shareholders of the Company 17, ,237 Non-controlling interest (163) (163) 16, ,074 Total comprehensive income attributable to: Shareholders of the Company 15, ,983 Non-controlling interest (277) (277) 15, ,706 (e) Change in presentation Starting from 1 January 2017, the management of Company decided to change presentation of Segment information, dividing the Generation in the Russian Federation segment into two separate segments: Electric Power Generation in the Russian Federation and Thermal Power Generation in the Russian Federation, and also to merge the segments Other and Unallocated and eliminations in Corporate centre, having previously allocated part of the assets to the segment Trading in the Russian Federation and Europe. The comparative information was revised accordingly (Note 4). 11

12 for the three months (unaudited) 3. Summary of significant accounting policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements for the three months are consistent with those followed in the preparation of the Group s annual financial statements for the year 31 December 2016, except for the adoption of new amendments of the following standards became effective as of 1 January 2017, noted below: a) The amendments of the following standards became effective for the Group s consolidated financial statements as of 1 January 2017: The amendments to IAS 7 Statement of Cash Flows are part of the IASB s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1 January 2017, with early application permitted. This amendments did not have any effect on the consolidated financial statements. IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses Amendments to IAS 12. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. These amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted. If an entity applies the amendments for an earlier period, it must disclose that fact. This amendments did not have any effect on the consolidated financial statements. This amendments did not have any effect on the consolidated financial statements. b) The following IFRSs and amendments to existing IFRSs that have been published are not yet effective: IFRS 2 Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 2. The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a sharebased payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted. IFRS 16 Leases was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement Contains a Lease, SIC-15 Operating Leases Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees leases of low-value assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. IFRS 16 is effective for annual periods beginning on or after 1 January Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard s transition provisions permit certain reliefs. IFRS 9 Financial Instruments. In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. IFRS 15 Revenue from Contracts with Customers was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January Early adoption is permitted. 12

13 for the three months (unaudited) 3. Summary of significant accounting policies (continued) The Group has not adopted earlier any other standard, interpretation and amendment that has been issued but is not yet effective. The Group is considering the implication of the new standards and the impact on the Group s consolidates financial statement and plans to adopt new standards when they become effective. 4. Segment information Operating segments are components of an enterprise about which separate financial information is available and is evaluated regularly by the Chief Operating Decision Maker ( CODM ) in deciding how to allocate resources and in assessing performance. The Management Board of the Parent Company has been determined as the CODM; the operating segment has been defined as a legal entity or a particular business activity of a legal entity. The Management Board analyses the effectiveness of the operating segments based on IFRS financial reporting. The Management Board considers the Groups activities from both geographical (by countries of the Group entities jurisdiction) and business perspective (electric power generation, thermal power generation, trading, supply, engineering and corporate centre) meaning that each operating segment represents a certain type of business activities or legal entities in a certain country. The following reporting segments have been identified based on the requirements of IFRS 8 Operating Segments (taking into consideration aggregation criteria as well as quantitative thresholds on revenue and EBITDA): Supply in the Russian Federation (represented by PJSC Mosenergosbyt (Group of entities), JSC Saint Petersburg Power Supply Company (Group of entities), PJSC Tambov Energy Retailing Company, PJSC Saratovenergo, JSC Altayenergosbyt, LLC INTER RAO Orlovskii Energosbyt, JSC Industrial Energetics, LLC RN-Energo, PJSC Tomskenergosbyt, LLC Omsk Energy Retailing Company, JSC EIRTS LO, LLC ESC Bashkortostan, LLC RT Energy Trading (equity accounted investee). Electric Power Generation in the Russian Federation (represented by Group Inter RAO Electric Power Plants, including NVGRES Holding Limited (till Note 7) and CJSC Nizhnevartovskaya GRES (equity accounted investees). Thermal Power Generation in the Russian Federation represented by: TGC-11 (represented by JSC TGC-11, JSC Tomsk generation, JSC TomskRTS and JSC OmskRTS); Bashkir Generation (represented by Group Bashkir Generation Company). Trading in the Russian Federation and Europe (represented by the trading activities of the Parent Company, RAO Nordic Oy, AB INTER RAO Lietuva and its subsidiaries, Inter Green Renewables and Trading AB, JSC Eastern Energy Company, LLC Payments implementation center). Foreign assets represented by the following reporting sub-segments: Georgia (represented by JSC Telasi, LLC Mtkvari Energy (till June 2016 Note 5), JSC Khramhesi I and JSC Khramhesi II); Armenia (represented by CJSC Elektricheskiye seti Armenii, JSC RazTES (equity accounted investees from 30 October 2015 till 29 December 2016 Note 5); Moldavia (represented by CJSC Moldavskaya GRES); Kazakhstan (represented by JSC Stantsiya Ekibastuzskaya GRES-2 (equity accounted investee till 1 December 2016 Note 5) and LLP INTER RAO Central Asia (till 21 September 2016 Note 5); Turkey (represented by Trakya Elektrik Uterim Ve Ticaret A.S.). Engineering in the Russian Federation (represented by LLC INTER RAO Engineering, LLC Quartz Novie Tekhnologii (equity accounted investee till 7 October 2016 Note 5), LLC Quartz Group, LLC Power Efficiency Centre INTER RAO UES (equity accounted investee), LLC INTER RAO Export, Energy beyond borders Non-forprofit Fund and LLC TCC Energy beyond borders). Corporate centre includes elimination of transactions among the reporting segments and management expenses, interest income and interest expense of the Parent Company and other subsidiaries, as well as loans and borrowings, obtained by the Parent Company and other subsidiaries, which cannot be allocated to a specific reporting segment on a reasonable basis. 13

14 for the three months (unaudited) 4. Segment information (continued) The CODM evaluates performance of the operating segments based on EBITDA, which is calculated as profit/(loss) for the period before finance income and finance expenses; income tax expense; depreciation and amortisation of property, plant and equipment, intangible assets; impairment charge/(release) of property, plant and equipment; impairment of goodwill and other intangible assets; impairment of available-for-sale financial assets and assets classified as held-forsale; provisions for doubtful debts and for inventory obsolescence; other provisions; share in profit/(loss) of associates and effects from acquisition and disposal of Group entities; income/(loss) from purchase and sale of available-for-sale financial assets and assets classified as held-for-sale; and charity expenses, income/(loss) from disposal of non-financial assets and some other included in Other item within the reconciliation between EBITDA of the reporting segments and net income/(loss) for the reporting period. The Group s definition of EBITDA may differ from that of other companies. Information about depreciation and amortisation of property, plant and equipment and intangible assets, interest income and interest expenses is disclosed in segment information as it is regularly reviewed by the CODM. Revenue of each segment is mainly represented by sales of electricity and capacity and heat-power allocated to the reporting segments. The CODM analyses leverage of the Group s subsidiaries, joint ventures (equity accounted investees) on a regular basis; loans and borrowings are allocated to the reporting segments excluding inter-segment balances. Joint ventures (equity accounted investees) are reviewed by the CODM in terms of the Group s share in their profit/(loss) and loan and borrowings. 14

15 for the three months (unaudited) 4. Segment information (continued) Below is the performance of the operating segments for the three months : Supply The Russian Federation Electric Power Generation Inter RAO Electricity Generation Group TGC-11 Thermal Power Generation Trading Foreign assets Engineering Bashkir Generation The Russian Federation and Europe Georgia Moldavia Turkey The Russian Federation Corporate centre Total revenue 162,714 42,477 11,152 16,744 11,682 2,614 1,068 3,902 1,992 (15,765) 238,580 Revenue from external customers 162,206 32,018 10,073 13,878 11,204 2,614 1,068 3,902 1, ,580 Inter-segment revenue ,459 1,079 2, (15,798) Operating expenses, including: Purchased electricity and capacity (89,187) (1,551) (794) (1,133) (9,191) (2,117) 15,341 (88,632) Transmission fees (64,666) (2) (1,211) (268) (3) (66,150) Fuel expenses (19,183) (4,217) (8,458) (18) (3,126) 584 (34,418) Share in (loss)/profit of joint ventures (11) 1,025 (20) 14 1,008 EBITDA 3,678 16,950 3,568 4,222 1,107 (171) (266) (1,426) 28,907 Depreciation and amortisation (433) (2,697) (447) (790) (41) (122) (80) (51) (248) (4,909) Interest income 1, ,172 Interest expenses (380) (33) (109) (9) (29) (29) (34) (80) (29) 54 (678) Total 15

16 for the three months (unaudited) 4. Segment information (continued) Below is the performance of the operating segments for the three months 31 March 2016 (restated): Supply The Russian Federation Electric Power Generation Inter RAO Electricity Generation Group TGC-11 Thermal Power Generation Trading Foreign assets Engineering Bashkir Generation The Russian Federation and Europe Armenia Georgia Moldavia Kazakhstan Turkey The Russian Federation Corporate centre Total revenue 148,619 39,463 10,770 16,289 19,517 3,369 1,363 4,914 1,465 (13,768) 232,001 Revenue from external customers 148,120 30,765 9,749 13,458 19,191 3,369 1,363 4,914 1, ,001 Inter-segment revenue 499 8,698 1,021 2, (13,807) Operating expenses, including: Purchased electricity and capacity (79,537) (1,678) (823) (943) (14,975) (1,210) 13,328 (85,838) Transmission fees (59,126) (3) (1,462) (312) (4) (60,907) Fuel expenses (17,680) (4,292) (8,421) (967) (35) (3,575) 550 (34,420) Share in profit/ (loss) of joint ventures (2) 20 1,809 EBITDA 4,912 15,055 3,353 4,498 2, ,061 (440) (918) 32,401 Depreciation and amortisation (522) (2,869) (324) (827) (51) (159) (133) (1) (455) (53) (254) (5,648) Interest income ,899 Interest expenses (381) (1,201) (270) (62) (69) (39) (72) (136) (21) 153 (2,098) Total 16

17 for the three months (unaudited) 4. Segment information (continued) As at Supply The Russian Federation Electric Power Generation Inter RAO Electricity Generation Group Thermal Power Generation Trading Foreign assets Engineering Bashkir Generation The Russian Federation and Europe Georgia Moldavia Turkey The Russian Federation Corporate centre TGC-11 Total Loans and borrowings, including: (6,670) (2,769) (581) (1,387) (1,136) (5,317) (154) (677) (18,691) Share in loans and borrowings of joint ventures (140) (140) As at 31 December 2016 Supply The Russian Federation Electric Power Generation Inter RAO Electricity Generation Group Thermal Power Generation Trading Foreign assets Engineering Bashkir Generation The Russian Federation and Europe Armenia Georgia Moldavia Kazakhstan Turkey The Russian Federation Corporate centre TGC-11 Total Loans and borrowings, including: (2,038) (5,238) (173) (1,780) (1,005) (6,701) (840) (17,775) Share in loans and borrowings of joint ventures (151) (151) 17

18 for the three months (unaudited) 4. Segment information (continued) The reconciliation between EBITDA of the reporting segments and net profit for the reporting period in the interim consolidated statement of comprehensive income is presented below: For the three months For the three months 31 March 2016 (restated) EBITDA of the reportable segments 28,907 32,401 Depreciation and amortisation (Note 19) (4,909) (5,648) Interest income (Note 20) 2,172 1,899 Interest expenses (Note 20) (678) (2,098) Foreign currency exchange loss, net (Note 20) (1,359) (1,116) Other finance income (Note 20) Provisions charge, including: (Note 19) (1,470) (3,437) other provisions release/(charge) 281 (967) impairment of account receivables (1,751) (2,470) Gain from disposal of controlling interest 4 Other item (6) (30) Share of loss of associates (Note 7) (64) (185) Income tax expense (Note 21) (4,099) (4,730) Profit for the reporting period in the interim consolidated statement of comprehensive income 18,807 17,074 The reconciliation between loans and borrowings of the reportable segments and loans and borrowings for the reporting period in the interim consolidated statement of financial position is presented below: As at As at 31 December 2016 Loans and borrowings of the reportable segments (18,691) (17,775) Less: share in loans an borrowings of joint ventures Loans and borrowings in the interim consolidated statement of financial position (18,551) (17,624) 18

19 for the three months (unaudited) 4. Segment information (continued) Information about geographical areas The Management Board also considers revenue of the Group entities generated in their countries of jurisdiction and abroad as well as non-current assets (property, plant and equipment, investment property, investments in associates and jointly controlled entities and intangible assets, including goodwill) based on location of assets. For the three months Revenue in countries other than Group entity s jurisdiction Revenue in the Group entity s jurisdiction 1 Total revenue based on location of customers Revenue in the Group entity s jurisdiction For the three months 31 March 2016 (restated) Revenue in countries other than Group entity s jurisdiction Total revenue based on location of customers Russian Federation 221, , , ,212 Turkey 3,902 3,902 4,914 4,914 Finland 3, ,226 3, ,815 Georgia 2, ,746 3, ,364 Lithuania 2,353 2,353 2,815 2,815 China 1,074 1,074 1,690 1,690 Moldavia (incl. Transdniestria Republic) 1, ,068 1, ,363 Kazakhstan Belarus Mongolia Estonia Latvia Other Total 235,186 3, , ,000 5, ,001 Total non-current assets based on location of assets 2 As at As at 31 December 2016 Russian Federation 299, ,000 Georgia 7,401 7,286 Turkey 3,470 3,709 Moldavia (incl. Transdniestria Republic) 3,411 3,735 Lithuania 1,117 1,206 Other Total 314, , Acquisitions and disposals Acquisition of controlling interest in LLC ESC Bashkortostan In December 2016 the Group acquired 100% of shares of LLC ESC Bashkortostan from entities under common control for the total cash consideration of RUR 4,100 million, including RUR 500 million paid in February This acquisition was accounted for using the pooling-of-interests method (Note 2d). As at 31 December 2016 the Group has 100% of the shares of LLC ESC Bashkortostan. 1 Revenues are attributable to countries on the basis of the customer s location. 2 Total non-current assets based on location of assets excludes deferred tax assets, available-for-sale financial assets and other noncurrent assets. 19

20 for the three months (unaudited) 5. Acquisitions and disposals (continued) Acquisition of non-controlling interest in PJSC Tomskenergosbyt As at 31 December 2015 the Group has 89.42% of the shares of PJSC Tomskenergosbyt. On 12 January 2016 the Group announced a mandatory offer to acquire 6.68% of ordinary and 36.44% of preference shares of PJSC Tomskenergosbyt held by non-controlling shareholders. The offer price was set at RUB per one ordinary and preference share. The offer term expired on 25 April Accordingly, as at 31 March 2016 the Group accrued a liability to the non-controlling shareholders in the amount of RUR 193 million, derecognised non-controlling interest in the amount of RUR 82 million and changes in retained earnings in the amount of RUR 111 million. As a result of mandatory offer the Group increased its share to 93.58%. Acquisition of non-controlling interest in PJSC Mosenergosbyt As at 31 December 2016 the Group has 93.99% of ordinary shares of PJSC Mosenergosbyt. In June 2016 annual shareholders meeting PJSC Mosenergosbyt decided to increase the Company s share capital through private subscription placement of the Company s ordinary shares. In February 2017 the Group participated in PJSC Mosenergosbyt shares placement in the amount of RUR 3,935 million. The total amount shares placement was RUR 4,020 million. As a result of private subscription the Group s share in PJSC Mosenergosbyt increased to 95.01% at. Other acquisitions and disposals In January 2017 the Group purchase from third part parties additional share in one of Group s subsidiaries for RUR 60 million. In June 2016 the Group has sold its 100% share in the subsidiary Mtkvari Energy LLC. At the end of September 2016 the Group has sold 100% shares in LLP INTER RAO Central Asia. In October 2015 and December 2015 the Group has sold the 50% share of its investments in the subsidiaries located in Republic of Armenia: CJSC Elektricheskiye seti Armenii and JSC RazTES, so the Group s share in these entities decreased from 100% to 50%. In December 2016 the Group has sold the remaining 50% share of its investments in CJSC Elektricheskiye seti Armenii and JSC RazTES. On 7 October 2016 the Group sold 50.10% of shares of LLC Kvarz Noviye Technologii. As at 1 December % interest in a joint venture JSC Stantsiya Ekibastuzskaya GRES was reclassified to held-for-sale assets due to management intention to sell the investment. During the three months the Group liquidated a number of individually insignificant subsidiaries. The gain from the liquidation of RUR 4 million was recognised in the interim consolidated statement of comprehensive income. 20

21 for the three months (unaudited) 6. Property, plant and equipment Land and buildings Infrastructure assets Plant and equipment Construction in progress Other Total Cost Balance at 31 December ,279 83, ,283 8,730 63, ,759 Reclassification 4 (3) (1) Additions ,212 5,286 Disposals (17) (102) (150) (45) (11) (325) Transfers (541) Transfer (to)/from other accounts (5) (1) 6 Translation difference (466) (133) (844) (33) (28) (1,504) Balance at 102,837 83, ,615 8,707 68, ,216 Including finance leases Depreciation and impairment Balance at 31 December 2016 (38,820) (38,312) (132,712) (4,845) (9,571) (224,260) Reclassification (2) 1 1 Depreciation charge (643) (814) (2,960) (194) (4,611) Disposals Transfers (3) (1) 4 Translation difference ,269 Balance at (39,061) (38,878) (134,874) (4,970) (9,538) (227,321) Including finance leases (39) (39) Net book value Balance at 31 December ,459 44, ,571 3,885 53, ,499 Balance at 63,776 44, ,741 3,737 58, ,895 Construction in progress is represented by property, plant and equipment that has not yet been ready for operation and advances to suppliers of property, plant and equipment. Such advances amounted to RUR 2,152 million as at 31 March 2017 (31 December 2016: RUR 3,084 million). Interest capitalised amounted to RUR nil (the three months 31 March 2016: RUR 286 million). 7. Investments in associates and joint ventures Joint ventures NVGRES Holding Limited Including CJSC Nizhnevartovskaya GRES Other joint ventures RUS Gas Turbines Holding B.V. Associates LLC INVENT Other associates Total Carrying value at 31 December , ,522 3, ,886 Disposals (3) (3) Share of profit/(loss) after tax 1,025 (17) 21 (82) (3) 944 Transfer to other accounts (8,650) (8,650) Translation difference (1) (1) Carrying value at 15, ,543 3, ,176 As at 31 December 2016 the Group held 75% interest in NVGRES Holding Limited, including its subsidiary CJSC Nizhnevartovskaya GRES accounted for using the equity method. In connection with the liquidation of NVGRES Holding Limited and the liquidator s decision on the distribution of the company s assets, as at, the Group accounted a 75% interest in CJSC Nizhnevartovskaya GRES in the amount of RUR 15,015 million, long-term loan issued to CJSC Nizhnevartovskaya GRES in the amount of RUR 150 million (Note 9) and short-term part of long-term loan issued in the amount of RUR 8,483 million and other short-term receivables in the amount of RUR 17 million (Note 10). In accordance with the term of the Shareholders Agreement between the Group and PJSC Rosneft, control over CJSC Nizhnevartovskaya GRES is jointly exercised. 21

22 for the three months (unaudited) 8. Available-for-sale financial assets As at available-for-sale financial assets in the total amount of RUR 7,704 million (31 December 2016: RUR 7,810 million) included investments in quoted shares in the total amount of RUR 5,998 million (31 December 2016: RUR 6,104 million) and investment in unquoted shares in the total amount of RUR 1,706 million (31 December 2016: RUR 1,706 million). For the three months and 31 March 2016 there was no impairment loss on available-for-sale financial assets recognised through profit and loss in the interim consolidated statement of comprehensive income (Note 19). For the three months 31 Ma rch 2017 the amount of RUR 85 million, net of tax RUR 21 million was recognised as a loss from revaluation of available-for-sale financial assets through other comprehensive income in the interim consolidated statement of comprehensive income (for the three months 31 March 2016: gain from revaluation in the amount of RUR 227 million, net of tax RUR 57 million). 9. Other non-current assets 31 December 2016 Financial non-current assets 8,206 11,223 Non-current trade receivables 1,743 1,925 Less impairment provision (262) (309) Non-current trade receivables net 1,481 1,616 Other non-current receivables 4,284 7,545 Less impairment provision (488) (951) Other non-current receivables net 3,796 6,594 Non-current loans issued (including interest) 3,092 3,269 Less impairment provision (183) (256) Non-current loans issued (including interest) net 2,909 3,013 Long-term bank deposits 20 Non-financial non-current assets 4,381 4,207 Non-current advances to suppliers and prepayments Less impairment provision (18) (19) Non-current advances to suppliers and prepayments net VAT recoverable 4 4 Other 4,338 4,162 12,587 15,430 22

23 for the three months (unaudited) 10. Accounts receivable and prepayments 31 December 2016 Financial assets 104,066 88,732 Trade receivables 110, ,127 Less impairment provision (33,304) (31,519) Trade receivables net 77,336 68,608 Other receivables 20,732 21,617 Less impairment provision (3,098) (2,889) Other receivables net 17,634 18,728 Short-term loans issued (including interest) 9, Less impairment provision (493) (505) Short-term loans issued (including interest) 8, Short-term outstanding interest on bank deposits Less impairment provision (10) (10) Short-term outstanding interest on bank deposits net Short-term receivables on construction contracts 369 1,307 Non-financial assets 13,975 15,373 Advances to suppliers and prepayments 8,533 9,051 Less impairment provision (1,493) (1,500) Advances to suppliers and prepayments net 7,040 7,551 Short-term VAT recoverable 3,564 3,872 Taxes prepaid 3,371 3, , ,105 The Group does not hold any collateral as a security. 11. Cash and cash equivalents 31 December 2016 Cash at bank and in hand, national currency 57,949 53,985 Cash at bank and in hand, foreign currency 8,406 7,526 Bank deposits with maturity of three months or less 26,918 34,477 Total 93,273 95, Other current assets 31 December 2016 Restricted cash 3,104 3,727 Bank deposits with maturity of 3-12 months 4, Short-term derivative financial instruments 72 Other Total 8,794 4,712 23

24 for the three months (unaudited) 13. Equity Share capital 31 December 2016 Number of ordinary shares issued and fully paid (in units) 104,400,000, ,400,000,000 Par value (in RUR) Share capital (in million RUR) 293, ,340 Change in retained earnings as a result of acquisition of controlling interests As described in the paragraph Predecessor accounting (see Note 2d) the Company accounted for acquisition of controlling interest from entity under common control using pooling-of-interests method. As a result, the Group consolidated the entity acquired and represented the financial statements as if LLC ESC Bashkortostan had been always consolidated. The amount of RUR 885 million represented the net assets of acquired entity was recognised in retained earnings as at 1 January The table below represents changes in retained earnings for the period from 1 January 2016 as a result of acquisition of subsidiary under common control. Balance at 1 January Profit of entity acquired 90 Balance at 31 March 2016 (restated) 975 Movements in outstanding and treasury shares In March 2016 the Group has acquired thousand shares of the Parent company (1% of its share capital) from the third parties for the price of RUR per share. The cash consideration in the amount of RUR 1,667 million was recognised in the interim consolidated statement of changes in equity and the interim consolidated statement of cash flows. 14. Loans and borrowings This note provides information about the Group s loans and borrowings. Certain loan agreements include financial and non-financial covenants. Loans and borrowings Currency 31 December 2016 Total in RUR RUR 1,890 3,696 Total in USD USD 5,757 7,148 Total in EUR EUR Total in JPY JPY Total in GEL GEL Finance leases Financial lease USD Financial lease RUR Financial lease EUR Total long-term loans and borrowings 9,828 13,157 Less: current portion of long-term loans and borrowings and long-term finance leases (3,805) (4,271) 6,023 8,886 As at fair value of loans and borrowings amounts to RUR 9,989 million (31 December 2016: RUR 13,417 million), and estimated by discounting of contractual future cash flows at the prevailing current market interest rates available to the Group for similar financial instruments. Changes in interest rates impact loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt). The Parent Company has a formal policy of determining how much of the Company s exposure should be to fixed or variable rates. At the time of raising new loans or borrowings management applies the policy to determine whether a fixed or variable rate would be more favorable to the Company over the expected period until maturity. As for other entities of the Group, following the corporate regulative documents, the decisions on raising new loans and borrowings on the subsidiaries level are subject for approval by the Parent Company. Management applies the same policy in making decisions in respect of the conditions of raising loans and borrowings on the subsidiary level. 24

25 for the three months (unaudited) 15. Accounts payable and accrued liabilities 31 December 2016 Financial liabilities Trade payables 46,565 47,832 Short-term derivative financial instruments Dividends payable 9 9 Other payables and accrued expenses 5,294 4,828 Total 51,894 52,686 Non-financial liabilities Advances received 25,774 35,694 Staff payables 11,438 9,333 Provisions, short-term 7,335 7,755 Total 44,547 52,782 96, ,468 As at advances received included RUR 10,564 million of payments for electricity sales from customers of PJSC Mosenergosbyt (Group of companies), JSC Saint Petersburg Power Supply Company, LLC RN-Energo and Group Bashkir Generation Company (31 December 2016: RUR 18,949 million), RUR 3,723 million of advances received by LLC INTER RAO Export for construction of power station in Ecuador and Cuba (31 December 2016: RUR 3,698 million) and RUR 2,024 million of advances received by the Parent Company from buyers of equipment in Ecuador and Venezuela (31 December 2016: RUR 2,247 million). 16. Other non-current liabilities 31 December 2016 Financial liabilities Long-term derivative financial instruments Other long-term liabilities 2, Total financial liabilities 2, Non-financial liabilities Pensions liabilities 4,075 4,081 Restoration provision 1,992 1,946 Government grants Other long-term liabilities Total non-financial liabilities 6,805 6,795 Total 8,891 7, Revenue 31 March 2016 (restated) Electricity and capacity 216, ,616 Thermal energy sales 17,194 15,807 Other revenue 4,813 7, , , Other operating income 31 March 2016 (restated) Penalties and fines received Electricity derivatives 26 Rental income Gain from disposal of controlling interest 4 Other ,419 1,431 25

26 for the three months (unaudited) 19. Operating expenses, net 31 March 2016 (restated) Purchased electricity and capacity 88,632 85,838 Electricity transmission fees 66,150 60,907 Fuel expenses 34,418 34,420 Employee benefit expenses and payroll taxes 11,813 11,316 Depreciation and amortisation 4,909 5,648 Provision for impairment of accounts receivable, net 1,751 2,470 Agency fees 1,138 1,124 Taxes other than income tax 936 1,019 Thermal power transmission expenses Repairs and maintenance Water supply expenses Other materials for production purposes Transportation expenses Operating lease expenses Cost of equipment for resale Other provisions (release)/charge (281) 967 Consulting, legal and auditing services Loss from electricity derivatives Loss on sale or write-off of inventory 18 2 Other 4,420 4, , , Finance income and expenses 31 March 2016 (restated) Finance income Interest income 2,172 1,899 Other finance income ,500 1, March 2016 (restated) Finance expenses Interest expenses 678 2,098 Foreign currency exchange loss, net 1,359 1,116 Other finance expenses ,056 3, Income tax expense 31 March 2016 (restated) Current tax expense 4,887 4,208 Deferred tax (benefit)/expense (659) 770 Am tax returns (129) (197) Provision for income tax (51) Income tax expense 4,099 4,730 26

27 for the three months (unaudited) 22. Fair value of financial instruments Fair value is determined either by reference to market or by discounting relevant cash flows using market interest rates for similar instruments. As a result of this exercise management believes that fair value of its financial assets and liabilities approximates their carrying amounts except for loans and borrowings. Fair value of loans and borrowings is disclosed in Note 14. Financial assets and liabilities measured using a valuation technique based on assumptions that are supported by observable current market transactions and assets and liabilities for which pricing is obtained via pricing services. In case prices have not been determined in an active market, financial assets with fair values based on broker quotes, investments in private equity funds with fair values obtained via fund managers and assets that are valued using the Group s own models whereby the majority of assumptions are market observable. Non-market observable inputs mean that fair values are determined in whole or partly using a valuation technique (model) based on assumptions that are neither supported by prices from observable current market transactions with the same instrument nor they are based on available market data. Main asset classes in this category are unlisted equity investments and debt instruments. Valuation techniques are used to the extent that observable inputs are not available, whereby allow situations in which there is little, if any, market activity for the financial instrument at the measurement date. Therefore, unobservable inputs reflect the Group s own assumptions about the assumptions that market participants would use in pricing of the financial instrument (including risk assumptions). These inputs are developed based on the best information available, which might include the Group s own data. Determination of fair value and fair values hierarchy The Group uses the following hierarchy to determine and disclose fair value of financial instruments: Level 1 quoted (unadjusted) market prices in active markets for identical assets or liabilities; Level 2 valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; Level 3 valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. The following table shows an analysis of financial instruments by level of the fair value hierarchy: At Note Total fair value Fair value hierarchy Level 1 Level 2 Level 3 Financial assets Available-for-sale financial assets Quoted investment securities 8 5,998 5,998 Held to maturity financial assets Long-term bank deposits Bonds issued by financial institutions Total financial assets 6,443 6, Financial liabilities Derivative financial instruments Electricity derivatives 15, Interest rate SWAP 15, Financial liabilities at amortised cost Loans and borrowings 14 9,989 9,989 Total financial liabilities 10, ,014 27

28 for the three months (unaudited) 22. Fair value of financial instruments (continued) At 31 December 2016 Note Total fair value Fair value hierarchy Level 1 Level 2 Level 3 Financial assets Derivative financial instruments Electricity derivatives Available-for-sale financial assets Quoted investment securities 8 6,104 6,104 Held to maturity financial assets Bonds issued by financial institutions Total financial assets 6,551 6,551 Financial liabilities Derivative financial instruments Electricity derivatives 15, Interest rate SWAP 15, Financial liabilities at amortised cost Loans and borrowings 14 13,417 13,417 Total financial liabilities 13, , Commitments Investment and capital commitments In accordance with the memorandum signed between the Group and the Government of Georgia in March 2013, the Group has to invest in realisation of projects aimed to improve the electricity network which belongs to the Group entity JSC Telasi. As at realisation of investment commitments was in line with schedule for the year As at capital commitments of subsidiaries of the Company are as follows: Subsidiary RUR, million JSC Inter RAO Electric Power Plants 5,153 LLC Bashkir Generation Company 5,461 JSC TGС Total 10,811 Capital commitments of JSC Inter RAO Electric Power Plants as at are mainly for supply of equipment for Permskaya GRES and for Verkhnetagilskaya GRES (block 12). Capital commitments of LLC Bashkir Generation Company included contractual obligations for the construction of Zatonskaya TEC, reconstruction of the office building and reconstruction of heating networks. Guarantees In September 2015 the Group entered into a bank guarantee agreement with ING Bank Eurasia for the purpose of financial support of agreement between the Group and CELEC EP for construction of HPP Toachi Pilaton (Ecuador). As at the guarantees amounted to USD 23 million, or RUR 1,323 million at the Central Bank of the Russian Federation exchange rate as of with an interest rate of 1.6% per annum (as at 31 December 2016: USD 24 million, or RUR 1,474 million at the Central Bank of the Russian Federation exchange rate as of 31 December 2016 with an interest rate of 1.6% per annum). These guarantees will expire in December In favor of the Group, the counter guarantees from the guarantor bank Gazprombank JSC were issued by the subcontractor of the Toachi Pilaton HPP project. In January-September 2016 the Group entered into the new guarantee agreement with ING Bank Eurasia for the purpose of financial support of agreement between the Group and CELEC EP for construction of HPP Machala (Ecuador). As at the guarantees amounted to USD 32 million, or RUR 1,825 million at the Central Bank of the Russian Federation exchange rate as of (as at 31 December 2016: USD 32 million, or RUR 1,964 million at the Central Bank of the Russian Federation exchange rate as of 31 December 2016). The guarantees will expire in January In favor of the Group, the counter guarantees from the guarantor bank Gazprombank JSC were issued by the subcontractor of the HPP Machala project. 28